Saturday, June 7, 2008

Qantas cutback

SYDNEY, Australia - Australia's Qantas Airways said Thursday it would discontinue or reduce a number of international services, mainly to Japan and Southeast Asian destinations, to cut costs in the face of high oil prices.

The announcement comes a week after Qantas unveiled changes to its domestic network in order to cut capacity by around 5 percent.

Chief Executive Geoff Dixon said in a statement that the cost of fuel had changed the way the Qantas Group had to do business over the next two years.

The airline will cancel its thrice-weekly service between Melbourne and Tokyo starting in September; reduce the number of weekly return flights between Sydney and Tokyo to seven from nine; and end the Jetstar service from Cairns to Osaka and Nagoya starting in December.

It will also replace 14 weekly Cairns to Tokyo flights with daily flights on Jetstar, its discount carrier.

"At current fuel prices, the Group would lose more than A$100 million (US$95 million) operating to Japan under our existing schedule," Dixon said.

He said the new schedules still offer significant capacity of more than 11,500 seats a week between Japan and Queensland.

Jetstar will withdraw its Sydney to Kuala Lumpur service and replace Qantas on Perth to Denpasar and Jakarta flights starting in December.

Dixon said there would be a small number of jobs lost in Australia and Japan as a result of the changes, in addition to job losses from last week's domestic changes that are "expected to be in the low hundreds."

Last week the airline unveiled changes to its domestic network after announcing a 2 billion Australian dollar (US$1.9 billion) increase in its fuel bill in the 2008-2009 financial year. The airline will retire aircraft, close some routes and shed jobs in an effort to control costs.

"We will continue to work with individual markets and look for opportunities as conditions improve to address capacity issues and reinstate services where and when we can," Dixon said.

Airlines around the region, including such leaders as Singapore Airlines and Cathay Pacific, have been trying to cut costs as rising fuel prices over the past year have eaten into profits.

Jet fuel prices have risen to record levels this year as the price of crude oil doubled on the New York Mercantile Exchange to a record of US$135.09 a barrel in May.